I tweeted yesterday morning after the 5am PDT Lightspeed (LSPD) earnings call:
“Ouch! LSPD. Rough conference call. Challenging quarter. Ambiguous, stormy sailing the next couple quarters. Sold my entire position at the open in the morning. Can’t win ’em all. Cutting losses and moving on to better performing companies. Adding proceeds to AMPL, DDOG & MNDY”
The LSPD earnings release and earnings call were quite revealing. Management is just not executing as smoothly as a public company out to be, organic growth (i.e. without recent acquisitions) is forecast flat for at least 6 months, they have massive headwinds with supply chain and macro economic issues, lack of customer growth and payment penetration…not to mention the legal distractions of the short seller accusations. I did not read or hear anything that gave me a comfort level to keep this company in my line up of only 10-12 great investments. Yesterday was a bloodbath as the stock dropped 30% plus and investors ran for the exits. LSPD has had an aggressive acquisition strategy the past 18 months that is simply failing to gain the traction as quickly as expected. With the revenue slow down, quarterly sequential revenue growth dropping off, legal hurdles, short sellers, management bewilderment, supply chain and other macro events impacting them…among other things…I just could not continue to hold Lightspeed as it failed to escape terminal velocity and created its own blackhole it is sinking back into…at least for awhile. I will keep my eye on them and perhaps a company to revisit in 6 months if they regain their boosters, but until then, I am out completely…NO PORTFOLIO POSITION REMAINING. I never do this lightly, but it is the right call.
DDOG to the rescue saved the day in their afternoon quarterly release with significantly accelerating revenue growth up to a whopping 75% y/y, accelerating 63% customer growth and 80% large customer growth over $100k. Overall an extremely optimistic and positive quarter and call, even if challenging at times to understand the accent of the CEO Olivier Pomel. Fantastic quarter and very optimistic they can maintain the accelerated growth into next quarter. One of the most promising forward indicators is an incredible RPO (Remaining Performance Obligations) growth acceleration. RPO Growth for 5 quarters: 50%, 78%, 81%, 103%, 128%!! Additionally, they now have 1,800 customers with ARR of $100,000 or more, an increase of 66% from 1,082 as of September 30, 2020 and announced 10 new products at their annual user conference. DDOG is not a new position for me. Indeed, most of my investments I hold or intend to hold for years. I’m simply NOT a day-trader. My first stock purchases of DDOG were back on September 19, 2019 (yes, pre-dating Covid) and I have had at least a dozen additional lot purchases to establish my current oversized 16+% position, including additional shares purchased just yesterday before they released earnings again (had a little cash after unceremoniously dumping LSPD shares). Very happy to own and continue to hold this one as long as they continue this incredible execution and growth…and they certainly accelerated nicely again this past quarter!
NET (Cloudflare) did not disappoint as this aircraft carrier (not the fastest boat in the water, but certainly one of the most reliable and steadfast) held things steady at full speed ahead with numerous new product announcements, many massive new deals both in the US and internationally in virtually every industry and sector, and one of the big surprises…announcing PROFITABILITY a full year earlier than expected. The CEO, Matthew Prince was simply effusive on the calls, with pronouncement including [paraphrasing here]: “R2 (their new objects store) will be disruptive to all cloud providers…R2 signups are off the charts…10x increase…imagine a world where no email attachment is opened on a client, but in a safe space in the cloud…etc”. The stock was up after hours and shot up to $218 at the high this morning, before the euphoria of the last 120 point surge wore off and it settled back down around $200, still up 80% in the last….ohhhh…2 months…if you bought it at the late September “lows” around $112. On May 13, less than 6 months ago you could have picked this one up for $66 and had a quick triple. Today when the stock hit $218, I celebrated a 10x on this one, having made my first purchase around $21 about 20 months ago. THAT folks is why I don’t try to time my stock purchases. I am very happy with all of 5 different lots of shares I purchased in the $20s…yes, even those highest “ridiculous” ones on May 22, 2020 at $28.25. In all, I have at least a dozen different small purchases of NET at various prices all the way up to $76. No regrets on any of them. When a GREAT company keeps on performing, I’m happy to be along for the stock ride and try not to worry about the price of the stock…that “tail” (stock price) will always eventually follow the dog as it runs with solid fundamentals and steady, reliable growth [11 consecutive quarters of 47% – 54% y/y revenue growth…folks, that’s a LOT of doubling in size over 3 years and some of the most consistent growth of any growth company I’ve ever owned…not the fastest…just the most reliable and consistent (e.g. aircraft carrier at full speed ahead!)
| Rev growth (y/y) | |
| Q1 2019 | 47.6% |
| Q2 2019 | 48.9% |
| Q3 2019 | 47.7% |
| Q4 2019 | 51.2% |
| Q1 2020 | 47.8% |
| Q2 2020 | 47.9% |
| Q3 2020 | 54.4% |
| Q4 2020 | 50.0% |
| Q1 2021 | 51.3% |
| Q2 2021 | 52.9% |
| Q3 2021 | 51.0% |
For earnings this quarter, the score stands at:
2 wins / 1 loss
8 more companies to go over the next 5 weeks. Stay tuned.
Cheers!
-Poleeko
